Tough Times, Hard Questions, Real Talk
Last week after the Circuit Breaker announcements, Jeremy had three guests, Addy from Monsoon, Sam Lim from Hair Inn and Jacky Tan from Starlight Salon to discuss the impact of the Circuit breaker and the struggles and difficulties Salon owners face during this period.
They’re expecting business to drop as much as 90% as most of their sales come from chemical services which they cannot provide now.
Landlords have been nice to waive rent this month (April) but if this Circuit Breaker continues, they will need more help. Jacky adds, “my salon in the CBD is given two months (April and May) of rent waived off as the whole CBD is empty”.
Salons are service-based and they need to make more space in the salon to ensure their clients are comfortable. Unfortunately, due to this circuit breaker, nobody is going to malls, especially those in the city. As bosses, they are working with the landlords to ensure we have enough cash flow to pay their staff even with the 90% drop in revenue.
One thing that Addy has explored is to close redundant salons, like the two he has in Jurong Point, or the two within walking distance at Century Square and Tampines One. He says that the three months rental deposit recovered from two of these salons will allow him to keep his staff on payroll for at least another nine months. However, as he will be terminating an ongoing lease, he is concerned that the landlords will not be able to refund the rental deposit.
What if a complete lockdown happens?
All pointed out that if the situation goes on for too long, they will have no choice but to place staff on unpaid leave. Some staff are already volunteering to go on staggered unpaid leave to ease the burden on the salon. Their current priority is to do everything they can to help their employees with their living expenses; which means unpaid leave will be the last resort, while ensuring the safety of their staff and their customers. “Money can be earned again, this has to be our first priority”, they agreed.
On discussing matters with staff-
All of them have discussed with their staff and explained to them the possible worst-case scenarios. Their staff are generally very understanding and some of them even volunteer to go on unpaid leave. The difficulty is to have to find the right balance between ensuring that the company survives and paying staff, if they pay the employees without regard to the company’s health then if the company dies, the entire staff will be out of jobs.
Addy adds that he appreciates his staff coming to him with ideas and telling him their biggest concerns. Everyone agrees and reassures viewers that of course, they will do whatever they can to make sure that jobs are saved.
On the Government salary subsidies-
The salary subsidies provided by the Singapore government (75% for April and 25% for subsequent months) definitely helps a lot. According to Addy, “this help cannot be taken for granted we must do all that we can to ensure the crisis resolves quickly. Ensure social distancing and don’t go out for unimportant things”.
How is business affected?
Sam: Badly affected, business is down 50%-60%, struggling to make ends meet.
Jacky: This situation, customers are quite worried, everyone wants to protect themselves that's why the business has dropped so much.
Addy: We’ve come in prepared, some shops are closed and some are open, half-half. We’ll see how this works out. Business has definitely dropped, only 2-3 staff per salon is needed now. We need to protect the staff and customers, so they need to wear gloves and masks, and clean everything they use. Most of our business comes from chemical treatments, so without them business has definitely suffered, but we still can cover our rent with haircuts. We’re not a barber shop or a 10 dollar salon. The big killer is rental.
Sam: 50-60% was before the Circuit Breaker, now with the Circuit Breaker I expect it to drop about 95%
Rental - How are your mall landlords helping you?
Sam: Their help is only temporary, only one or two months, if this thing continues for a long period of time, they will have to do more. What I feel they should do is maybe reduce the rent by half till the remainder of the lease. That would help a lot.
Addy: So you mean from this month all the malls.. Northpoint, Tampines One Century Square Novena and just this morning, Jurong point have said they will waive rent this April, out of their own pockets. Novena will just collect GTO (Gross Turn Over) if you open, if you’re closed they won't collect. So this resolves our April problems, to allow us to keep our workers. But if this continues to the end of the year, like what Sam said, I think mall operators should reduce rent for the rest of the lease. This is because hair salons are service providers, we are greatly affected by the reduction in footfall. Also, we pay high amounts of rent, as most of the salons need to be very big. We pay very high prices per square feet too, from $1k to 1.5k, this can come up to $30k worth of rent a month. The biggest problem is directed at the bosses, they have to work with landlords to come up with solutions to prevent them from forcing their workers to go on unpaid leave or even worse, letting them go.
Jacky: Under Capitaland, I have only one salon so my stress is way less than Addy or Sam because they have multiple salons, so definitely cannot compare, they need to take care of many more workers than me. Capitaland also waived off two months of rental, April and May. What I know from Capitaland is that the rebate comes out of their own pockets, extra out of the Government’s property tax rebates. If we want to continue operating, they will only charge us the GTO.
Addy: Sam! We need to ask our landlords for a two months rebate, since Capitaland already gave their tenants two months. Even more, we need to ask for four to five months! Today is a sharing, everyone who is here watching should share. Our Bukit Timah outlet, which is under a private owner, has given us free rent. Only our offices have not given us any rebate. Another one of our landlords have given us the option to take the rent out of our deposit, but we did not accept this.
Jacky: We cannot compare because most of the salons are in heartlands, my salon is in the city, and there's completely nobody that's why they have waived rent.
What happens if we are all locked down, are you all prepared?
Jacky: I'm not concerned about the business, more for the employees. So if there is a 100% lockdown I believe we won't need to pay rent or salary. Most of the hairstylists in Singapore come from Malaysia, and they come here to earn a living. They need to pay rent and provide for their family.
Jeremy: I think we need to deal with this situation with some humanity, of course we cannot lay off staff that have been working for us for 10+ years and depending on us. But we also need their understanding so that the business can still survive and we need to survive together.
Sam: To be honest, we are not prepared for it, but if it really happens we will have no choice but to put some employees on unpaid leave.
Addy: To add to Sam’s comment, he means that if this continues and we are all out of options then maybe we will need our workers to take unpaid leave.
Sam: Yes, because we don’t know how long this will last.
Addy: Yes, in this current situation we are doing everything we can to help our employees with their living expenses, their safety and our customers’ safety. This is our first priority. We don’t need to talk about other things first. Money can earn again later
Jacky: How many Malaysians are stuck? They can’t go back to Malaysia but need to pay rent in Singapore, they are in a dilemma.
Sam: We are definitely working something out for our Malaysian staff
Jacky: But I'm glad the Singapore government has helped a lot, they have waived all the work permit levies, so they have reduced a lot of stress for our companies.
Have you discussed this with your staff about this?
Jacky: Yes, when the budget was announced I have already discussed it with my staff. I have a very small team so it is easier to get everyone together to have a conversation. They are very understanding and some hair technicians have volunteered to take a pay cut since there are far fewer customers in the salon.
Sam: Well it depends on the situation, I've spoken to some of them and told them to be mentally prepared if the situation doesn't improve. We will have to take drastic measures like reduction of salary but fortunately the government has announced that they will step in and help with this. Foreign worker levies in April are waived so for the time being we still can pull through.
Jeremy: To all the hairdressers watching, have a good, honest talk with your bosses. Everyone is in the same boat, if your boss runs out of cash, both of you will sink. Have a good heart-to-heart talk with them to figure out how to come out of this together.
Addy: My staff have come up to me to ask for help and suggestions. This is both of us sharing the burden of this crisis, and I prefer their suggestions to my own ideas.
Subsidies for salaries by the government, 75% for the month of april and 25% subsequently, do you guys think that this is enough?
Sam: It's not enough but it definitely helps.
Addy: they are trying to help us to the best they can, (I'm a PR and I consider Singapore my home) as compared to all the help we receive from the various governments of all the salons I own overseas. The Singapore government has been the quickest to help, and if it gets worse, I have confidence more help will come. Now we have to make use of this help, not take it for granted and do our best to resolve this crisis.
Addy: So one thing everyone has been asking me, if this continues, will you close down any of your salons? If I close down I will get sued for breaching the leasing contract, so this is a very big problem for me. Sam, is this a problem for you as well?
Sam: Yes, this is a very big problem for me too. In the worst case scenario we will have to shut down underperforming outlets and transfer the staff to other outlets.
Addy: If I have 7-8 salons and I want to close some redundant ones, like I have 2 salons in Jurong Point and one at Century Square and Tampines One, how do I resolve these contracts if I terminate the lease, will the landlords sue? Will they return the three months deposit back? This is a very important and big issue for me.
Jeremy: The Ministry of Law has said that contracts will be more relaxed this period but we will need more information. Most importantly, whatever decisions we make we have to do it in good faith - Meaning it was a last resort or really at wits end. We cannot take advantage of this situation to get out of our leasing contracts just because the salons are underperforming. It has to be a mutual thing so we should let the government talk about this.
Jacky: Everyone is facing the same problem. I don’t believe if any shop is forced to close (due to this) the landlords will sue. I don't think the government will allow the management to sue all their tenants and win. I don’t think it will be so messy
Addy: There's another problem, if I close they won't sue but they might not return me the deposit. This deposit is worth a lot, especially if you have multiple outlets, it can cost up to half a million in deposits. We definitely can't shut down all our stores, but if we choose to shut down one or two outlets, the deposits we collect can be used to save our remaining outlets, save us from laying off staff and placing people on unpaid leave. This is a pretty big problem, because staff can weather the situation with us, and these deposits can allow us to operate for another 6 months.
Watch the full discussion here.